Investing.com — Citi analysts have unveiled their equity strategy for the first quarter of 2025, emphasizing a more balanced approach amid changing macroeconomic conditions and policy uncertainties.
Their ‘SIGN (Sector & Industry Group Navigator)’ outlines key areas of focus for investors as the year progresses.
The strategy involves a combination of growth, cyclical and defensive play, adapting to mixed signals in the economy.
Citi analysts warn that “Trump-related policy uncertainty during the first quarter” could amplify market noise.
They suggest that investors should prioritize sectors with strong fundamentals, reasonable valuations and opportunities for margin improvement.
Citi recommends overweight positions in sectors such as healthcare, communications services and energy.
Healthcare was moved to ‘overweight’, with pharmaceuticals and biotech leading the way due to ‘correct’ valuations and fundamentals closer to inflection.
Communication Services remains a strong choice, supported by robust growth drivers in Media & Entertainment and attractive valuations in Telecommunications.
The analysts also make the case for semiconductors within the information technology sector, citing the sector’s implied growth potential and continued margin expansion.
Conversely, consumer discretionary has been downgraded to underweight.
“Expectations appear higher than consensus estimates,” Citi noted.
Citi said banks remain their preferred cyclical overweight, benefiting from improving deposit growth and loan repricing trends.
Energy is described as a ‘contrarian overweight’, with the potential for revaluation as fiscal stimulus and infrastructure investment gain momentum.
In defensive positions, Food, Beverage & has been upgraded to overweight, with the fundamental outlook looking solid, “while the sector group is trading at almost oversold levels.”
With potential rate risks and geopolitical uncertainties ahead, Citi is urging investors to align sector views with stock selection. They are Overweight three of the “Magnificent 7” stocks, Alphabet (NASDAQ:), Meta (NASDAQ:) and Nvidia (NASDAQ:), Market Weight Two, Microsoft (NASDAQ:) and Amazon (NASDAQ:), and Underweight Apple (NASDAQ:) and Tesla (NASDAQ:).
